His decision last week to sack Harriet Harman, his social security secretary, as part of a major Cabinet reshuffle, has exposed deep divisions in the upper ranks of the ruling Labour Party. It has also precipitated the worst internal crisis Blair's administration has faced since its accession to power in May last year.

"We have spent more than a year and produced a reform-policy vacuum," one Downing Street official says. "It has been a disaster."

On one side of the current debate is Frank Field, Ms. Harman's deputy, who quit when Blair refused to appoint him as social security secretary.

Mr. Field advocates maintaining a "universal" system guaranteeing all citizens free medical care under the national health service, state pensions for all workers and their spouses, generous unemployment and sickness payments, and a range of other benefits, including cash to parents to help bring up their children.

He also opposes "means testing" - the right of governments to check on an individual's financial situation before authorizing payment of benefits.

ON the other side are individuals like Chancellor of the Exchequer Gordon Brown, who says Field has vastly underestimated the cost of his proposed reforms.

"The annual charge to taxpayers would be close to [$33 billion]," one senior official says. "That would be politically unacceptable."

Mr. Brown has said he favors targeting welfare to "the people most in need." His formula also calls for encouraging people back to work through special job-training programs and tax breaks. This approach would require means testing before pensions and other benefits were paid - a controversial concept because it would be a reversal of the traditional Labour Party approach.

In the 1980s and early 1990s, Margaret Thatcher and her successor, John Major, grappled with the same problem. They encouraged people to take out private medical insurance and private pensions. But for all of their efforts, they only nibbled at the edges of the exorbitant social safety net. And the bill continued to grow.